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Nigerian economy

Can you imagine a Nigerian celebration without ‘Spraying’? It seems almost impossible. ‘Spraying’ has become a huge part of the Nigerian celebration culture, so much that even when we are not in our country we continue by spraying the currency of whichever country we’re in.

More recently, The Central Bank of Nigeria (CBN) and the Nigerian Police in Lagos State have set in motion to prosecute those who spray the Naira at parties and other abusers of the Naira.

The Lagos police have already arrested 18 offenders of Naira abuse, the arrests have been made under the contravention of Section 21, sub-section (4) of the Central Bank of Nigeria Act, 2007 which reads “It shall also be an offence punishable under Sub-section (1) of this section for any person to hawk, sell or otherwise trade in Naira notes, coins or any other note issued by the Bank.”

The Lagos state police have also stated that they are going to start arresting Nigerians who organize events and allow those selling naira notes in their venues.

The officer in charge at SCIID, Deputy Commissioner of Police (DCP) Bolaji Salami said, “We are clamping down on those abusing our currency. It is an offence to sell Naira notes at weddings or any gathering. It contravenes the CBN Act. Investigations would reveal how these suspects come about these new currencies. We are going to get to the root of it because the offence is punishable by a fine of N50, 000 or six months imprisonment or both. Already, we have started arresting people who spray money at social events. Sanity must return to our system and our currency must be respected. We know that these are not the real targets because if they don’t get the mint notes, they won’t be able to sell it. So, our main targets are commercial banks and even our staff who release this money to these vendors. Once these suspects confess and mention their names, we’ll go after them.”

So I guess this could be the beginning of the end of the ‘spraying’ culture in Nigeria, what is your take on spraying of currency at celebrations? Are you for or against it?

Nigeria has a vision of becoming one of the Top 20 World Economies by the year 2020. However, in more recent times it seemed as though it was a far reach with the plummeting Naira exchange rate and the country suffering from a ‘recession’ which has been labelled a “self-created recession”.

The Central Bank of Nigeria (CBN) has re- introduced the Cashless Nigeria policy which was first introduced in Lagos in 2012, These new amendments to the policy have already started to make a positive impact on the Nigerian forex rate.

The policy on cash-based transactions stipulates a cash handling charge on cash withdrawals and deposits that exceed N500,000 for Individuals and N3,000,000 for corporate bodies. The policy on cash-based withdrawals in banks aim at reducing and NOT ELIMINATING the amount of physical cash circulating in the economy, and encourages more electronic-based transactions in order to improve the effectiveness of monetary policy in managing inflation and driving economic growth. The circular published on the 23rd of February 2017 extended the Cashless Nigeria policy to all states across the country and should be in full effect across Nigeria by October 2017.

What are your thoughts on the Cashless Nigeria policy? Do you think it’s a positive move to end or at least reduce corruption? is it a good way for Nigeria to adopt a cashless system, reducing crime and increasing safety? Or do you think that it is too difficult for a country like Nigeria? I would love to hear back from you.

Virtual currencies have become increasingly popular in more recent times. Many have taken part in these schemes with hopes of receiving large returns after “investing” their money over a short period of time; promising large returns of almost double of what was invested.

Virtual currency schemes usually have very attractive and mostly unrealistic interest rates. They offer many potential benefits, which include greater speed and efficiency in making payments and transfers particularly across borders and ultimately promoting financial inclusion. However, Virtual Currencies pose considerable risks as potential vehicles for money laundering, terrorist financing, tax evasion and fraud.

In 2014, the European Banking Authority defined Virtual Currencies as a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically”.

I will be referring to a very “popular” virtual currency system currently in Nigeria: MMM.

MMM is a Ponzi scheme which was established in Russia in 1990 by Sergei Mavrodi. The scheme has been introduced to developing countries like India, South Africa, and Zimbabwe.

In November 2015, MMM launched a website targeting the Nigerian audience, also claiming a “30% per month” return including other acquirable bonuses on the first ‘contribution’. MMM was described as a “mutual aid fund where ordinary people help each other” which they termed as “Providing Help” and “Getting Help”. With the current economic situation of the country, the unemployment rate, quick returns almost out of this world in such a short period of time, it’s no surprise that there were over 2.4 million people registered on MMM by late 2016.

The scheme was running smoothly, until they (MMM) claimed that traffic on the website was “too much” and they had to temporarily close the site and would re-open on the 14th of January, 2017. They also blamed the government for causing fear and making MMM ‘investors’ skeptical of ‘providing help’.

Government bodies like the Central Bank of Nigeria have warned Nigerians against making investments in virtual currency operations in Nigeria.

The MMM Nigeria site was re-opened on the date promised. However, many people have not received payments from their ‘investments’. MMM Nigeria reopened with a new ‘twist’, in a letter to its participants introducing Bitcoin as a part of the scheme. They informed participants that they would be able to make and receive payments in Bitcoin instead of bank transactions which was the previous system.

Bitcoin uses peer-to-peer technology to operate with no central authority or banks managing transactions and the issuing of Bitcoin is carried out collectively by its network. This means that MMM Nigeria will no longer have the same effect as it did and many Nigerian participants will struggle to adapt to the new system being embraced.

Most importantly, while risks to the conduct of monetary policy seem less likely to arise at this stage given the very small scale of virtual currencies operating in Nigeria, virtual currencies are difficult to regulate as they cut across the responsibilities of different agencies at the national level, and operate on a global scale. Many virtual currencies are opaque and operate outside of the conventional financial system, making it difficult to monitor their operations.

Now that we’ve got all this information about virtual currencies, and the impact it’s made in Nigeria. Let me know your experiences with MMM, were you one of the people that got their money stuck at the end? or one of thoses that made thousands of naira from it?